Adelaide metal foundry Intercast & Forge general manager Brad Lawrence said the company has saved $600,000 on its power bills in the past three months from using "demand response" strategies to switch off in times of peak demand.

With power bills of between $700,000 and $1.2 million each month – with a 41 per cent price hike last financial year alone – it's a significant saving for the foundry, which consumes about 4 per cent of South Australia's energy supply each year.

Mr Lawrence said spiralling power prices had forced the company to turn to a computerised system that alerts the company when spot prices reach high levels – which is usually mid to late-afternoon on hot days – and it then shuts down its furnaces until the prices come back down to a more acceptable level.

"It's fairly pragmatic but from our point of view there is clearly a cost benefit from not using that at the top of the power curve," Mr Lawrence told The Australian Financial Review.

"We're not in the business of being energy or electricity experts, but the nature of the market in the last couple of years has forced us to learn a hell of a lot more rather than just accept contracts [from retailers]. We have to be smarter in what we do."

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Intercast & Forge is one of 10 companies, including Upstart energy retailer, which have won tenders to supply up to 200 megawatts of "demand response" electricity to help keep the lights on in the eastern states of Australia this summer.

The trial scheme will see industrial energy users and households be paid to cut back their power use during peak times, or to send electricity back into the grid from home batteries, solar panels and other sources at times of extremely high demand to help prevent price spikes and blackouts.

Power commitment

Intercast & Forge have committed to deliver 10 megawatts of electricity off the grid when asked to by the Australian Energy Market Operator, for which it will receive $323,654 in funding from the Australian Renewable Energy Agency.

Mr Lawrence said the company had already saved $600,000 on their power bills in the past three months alone - from being on the spot market rather than a long-term contract with a retailer as well as turning their four furnaces off for a total of 39 minutes, normally for five minutes or less, during peak periods.

In all, 10 pilot projects have been awarded funding under the tender, run by AEMO and ARENA as part of a broader effort by AEMO to reduce strain on the grid during extreme peaks. The projects, which will receive $35.6 million of funding in total from ARENA and the NSW government, will make at least 143MW of capacity available this summer.

EnergyAustralia is making the largest single commitment in the three-year trial, with about 50MW of capacity across NSW, Victoria and South Australia. The $9.8 million awarded by ARENA will fund initiatives from notifications to customers to reduce demand, high-tech monitoring devices, battery storage and the conversion of some processes to run on biofuel.

EA managing director Catherine Tanna said the demand response approach "puts customers in control and keeps costs down, because the cheapest generation is the generation you don't have to build."

Funding to Powershop will go on the junior's "Curb Your Power" initiative, in which customers in Victoria will receive an offer via a mobile app to lower or switch off air conditioners or appliances and are rewarded financially.

Separate initiative

In a separate initiative that is not part of the AEMO tender, Origin Energy is working with British-based start-up Tempus Energy in a trial involving a group of industrial customers in South Australia that are able to shift power use into cheaper periods or when renewable energy is plentiful.

That exceeds the 1600MW capacity of the shuttered Hazelwood coal-fired power station in Victoria. Hazelwood's retirement in March triggered a spike in wholesale prices on the National Electricity Market and fuelled fears of a repeat of last summer's power outages in South Australia, Victoria and NSW.

Federal Energy Minister Josh Frydenberg said that as part of the trial, thousands of households will be invited to voluntarily conserve their energy in exchange for incentives such as rebates on their power bills.

AEMO said in a report to the Turnbull government on dispatchable power capacity in the NEM that without actions such as these, there could be a supply gap of about 1000MW in South Australia and Victoria when demand spikes on extremely hot summer days.

The bulk of the 1000MW of demand response capacity identified by Ms Zibelman will be decided under a separate tender using AEMO's rarely used Reliability and Emergency Reserve Trader mechanism or RERT.

Distributed energy resources include solar panels, batteries, smart thermometers on energy-hungry appliances such as air conditioners, freezers and pool pumps, as well as the small but growing number of electric vehicle chargers.

Customers can be given discounts or paid a share of the high wholesale power prices of as much as $14,000 a megawatt hour that occur during such supply squeezes, although the purpose of the exercise is to trim those price peaks by better balancing demand and supply.